Analysts raise estimates on Valeant Pharma

NEW YORK (AP) -- Analysts raised their earnings estimates for Valeant Pharmaceuticals International Inc. Wednesday after the Canadian drug developer agreed to buy Bausch + Lomb in a major expansion of its ophthalmology business.

THE OPINION: Jefferies & Co. analyst Corey Davis described the deal as "extremely attractive," saying he thinks the combined company will earn $11.64 per share in 2015, after Valeant starts to realize savings from the acquisition. Davis and Stifel Nicolaus analyst Annabel Samimy both said Valeant will have an even more diverse business after the deal closes, and have a broad geographic base.

Samimy said that the combined company will earn a little more than a third of its revenue from dermatology and aesthetics products, a third from eye care products, and almost a third from neurology, consumer products, and oral medications.

Both analysts rate Valeant shares at "Buy." Davis raised his price target to $120 per share from $77 and Stifel's rose to $110 per share from $78.

On Monday, Valeant said it will pay $4.5 billion to buy Bausch + Lomb, which is privately held. It will spend another $4.2 billion to repay Bausch + Lomb's debt.

Bausch + Lomb makes contact lenses, eye drugs and ophthalmic surgical devices. It expects about $3.3 billion in revenue this year, while Valeant expects $4.4 billion to $4.8 billion. Valeant said the deal will help it capitalize on increasing demand for contact lenses and other products because of aging populations, growing demand in emerging markets and increasing rates of diabetes. Complications of the complex blood sugar disorder can damage the eyes over time.

The deal is subject to approval from regulators, but the companies expect to complete the sale during the third quarter of 2013. Valeant expects to achieve at least $800 million in annual cost savings by the end of next year, and said the acquisition will add to its profits immediately.

Valeant has made more than 50 acquisitions since 2008. Its biggest deals include a $1.65 billion tie-up with Biovail Corp. in 2010 and its $2.6 billion acquisition of dermatology products maker Medicis Pharma in December.

THE STOCK: Valeant shares fell $1.28 to $90.52 in afternoon trading. The shares are up more than 21 percent since rumors about the Bausch + Lomb purchase began to circulate on Friday.